Fun With Math: One Man’s Attempt to Craft Revenue Neutral Tax Reform

I wasn’t always like this, I swear. There was a time in my life when if I wanted to satisfy my urge for tinkering, I’d kill a few hours on ESPN’s NBA Trade Machine, trying to determine exactly who my beloved New Jersey Nets would have to give up to acquire a young James Harden. But now…well, now I scratch that same itch by wondering, “Can I devise a revenue-neutral tax reform plan?”

And yes, I am significantly less fun at parties than I used to be.

But before my nerdiness drives you away, consider the importance of my undertaking. A revenue neutral tax plan — one that generates the same amount of tax revenue over the next decade — is the carrot the GOP is chasing. Why? As we’ve discussed in this space before, a tax reform plan — one that cuts rates, simplifies the law, and yes, as mentioned in the previous sentence, results in no net loss of tax dollars — can be passed through what’s called the “budget reconciliation process.”

Under this process, should the House and Senate ever get around to approving budgets that provide for a tax reform plan, that plan could be passed with only a simple 51 majority in the Senate. And because Republicans currently hold 52 seats in the Senate, it means that the GOP could pass its vision of tax reform without a single vote from a Democrat.

The catch, however, is that in order to use the reconciliation process, any bill cannot add to the deficit beyond the ten-year budget window, hence the need for revenue neutral tax reform.

The items in this blog are informational only and are not meant as tax advice. Consult with your tax advisor to determine how any item applies to your situation. A select group of Tax Professionals of WithumSmith+Brown write Double Taxation, and any opinions expressed or implied are not necessarily shared by anyone else at WithumSmith+Brown.

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